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UK treasury policy address delivered amid Brexit uncertainty

RFP
Tax Hot Topics newsletter Recent Brexit developments cast a cloud of uncertainty over UK Chancellor of the Exchequer Philip Hammond’s Spring Statement to Parliament March 13. The Spring Statement, akin to a U.S. cabinet secretary’s routine testimony before Congress, is one of two appearances the Chancellor of the Exchequer makes before Parliament each year to address the nation’s economic outlook and the government’s policy priorities.

Although no new tax policy measures were announced, a number of policy papers and consultations were published. In addition, Hammond reiterated the government’s commitment to the following policies:

  • Taking on “digital giants” with an investigation into competition in digital advertising and confirmation that the UK will press ahead with a Digital Services Tax
  • Housing investment and Northern Powerhouse transport infrastructure
  • Measures to tackle climate change

However, these efforts are largely contingent on the United Kingdom completing the current phase of Brexit negotiations. Parliament recently voted against Prime Minister Theresa May’s Withdrawal Agreement for a second time and decided against leaving the European Union without a deal in place. May was forced to seek a delay of the original March 29 exit date as a result, but unconvinced by her ability to avoid a no-deal Brexit, European Union leaders have initially only granted the United Kingdom an additional two weeks, until April 12.

In the coming days, British members of Parliament will likely vote for a third time on May’s exit deal. However, it is unclear whether they are any more likely to vote the deal through.

If the Withdrawal Agreement is agreed by Parliament this week, the EU will grant a small extension, until May 22, to enable the government to enact the necessary legislation in time. If Parliament does not approve the Withdrawal Agreement but wishes to avoid a no-deal Brexit, Britain must participate in the upcoming European Parliament elections and set out a convincing “Plan B” for next steps and agree a longer extension to Article 50 (which must be agreed by all EU leaders) before April 12.

This week, Parliament will bring forward the legal process to extend Brexit to April 12 and also bring forward a third vote on the Withdrawal Agreement. In the meantime, businesses in Britain and those which do business with it are still left in uncertainty.

A no-deal Brexit on April 12 appears a distinct possibility and should form the central planning scenario for any organization. The message for businesses invested in Britain at this stage is to plan ahead for the worst and to get ready for a disruptive no-deal Brexit.

Contacts:
David Sites
Partner
Washington National Tax Office 
T +1 202 861 4104

David Zaiken
Managing Director
Washington National Tax Office 
T  +1 202 521 1543

Cory Perry
Senior Manager
Washington National Tax Office 
T +1 202 521 1509

Mike Del Medico
Manager
Washington National Tax Office 
T +1 202 521 1522